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Sharing Fee from Tax Appeal with Nonlawyer

Adopted: July 19, 2013

Opinion rules that a law firm may not share a fee from a tax appeal with a nonlawyer tax representative unless such nonlawyer representatives are legally permitted by the tax authorities to represent claimants and to be awarded fees for such representation.


A is a nonlawyer independent tax representative who has worked with Company B in seeking to achieve a reduction in the county assessment of Company B’s property for ad valorem taxes. Under A’s contract with Company B, if A is successful in achieving a reduction in the assessment, he is entitled to receive a percentage of Company B’s tax savings. It is assumed that A is limiting his representation to activities that do not constitute the practice of law.

Pursuant to the contract with Company B, A is authorized to obtain counsel provided it does not increase the amount Company B is required to pay for representation.

A and Company B want to appeal to the North Carolina Property Tax Commission seeking a reduction in the assessment. A licensed lawyer is required to pursue the appeal.

With Company B’s consent, may A retain Lawyer to represent Company B on the appeal and pay Lawyer a percentage of A’s share of any tax savings for Company B? May Lawyer be paid out of A’s share on an hourly basis?


Rule 5.4(a) regulates the distribution of fees that, because of the prohibition on the unauthorized practice of law, may only be earned by a lawyer. See 2005 FEO 6. The purpose of the prohibition, as noted in comment [1] to the rule, is to protect the lawyer's professional independence of judgment from interference from a nonlawyer. The prohibition also prevents solicitation of cases by lawyers and discourages nonlawyers from engaging in the unauthorized practice of law. See 2003 FEO 10.

Unless nonlawyers are legally permitted to represent taxpayer/claimants before any taxing authority, and to be awarded fees for such representation, the proposed arrangement constitutes improper fee sharing in violation of Rule 5.4(a).

The instant scenario can be distinguished from those addressed previously by the Ethics Committee in 2003 FEO 10 and 2005 FEO 6. The two prior opinions apply to nonlawyer representatives of disability claimants before the Social Security Administration (SSA). 2003 FEO 10 holds that a Social Security lawyer may agree to compensate a nonlawyer representative for the prior representation of a disability claimant before the SSA. 2005 FEO 6 provides that the compensation of a nonlawyer law firm employee who represents Social Security disability claimants before the SSA may be based upon the income generated by such representation. However, nonlawyers are legally permitted to represent disability claimants before the SSA and to be awarded fees for such representation. See 42 U.S.C. § 406. When generated by a nonlawyer as authorized by law, such a fee cannot be designated a “legal fee” subject to the limitations of Rule 5.4(a). See 2005 FEO 6.

Lawyer should negotiate his fee directly with Company B.

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